Zuckerberg, Sandberg, CFO, board inc Peter Thiel and Palantir are defendants - it's a result of sealed docs between FB execs and board.
Major new plaintiff allegations - many long concerning:
1. FB spent billions to protect Zuckerberg personally
2. Claims "epic corporate governance breakdown"
3. Adds list of "insider trading" defendants
4. Documents Zuckerberg misled Congress
It's a whopping 390 pages and there is a related 220 page suit filed in same court on the same day.
Together they bring the kitchen sink on allegations as to how the platform gained market power, failed its 2012 FTC Consent Decree, covered-up and failed to disclose data harms.
As background, State of Rhode Island originally had sued Facebook
claiming it WAY overpaid FTC by as much as $4.9B to protect Zuckerberg. It won rights to inspect a lot of docs from 2013-2019 leading to this new lawsuit which draws on a ton of evidence from all over the place.
The central allegation kicking this off is the FTC's draft settlement named Zuckerberg personally which would have caused all sorts of issues for him. The board, entirely controlled by Zuckerberg, refused and paid $5B to protect him so FTC didn't name him personally.
The allegations in this new derivative lawsuit upon seeing the board docs is that all of this is a result of the lawsuit calls an "epic governance failure," more on that in a minute.
Original suit of course was filed due to Cambridge Analytica. New lawsuit has more details than anything I've seen (many sealed). Reminder, case centers on millions of stolen and sold Facebook
users' data. According to suit, only .31% had consented to it being shared.
As Zuckerberg's close buddy, Bosworth, helped broadcast at the time - Facebook
claimed it wasn't a "breach" or "hack" because the systems were designed and known to work the way they did. The platform was the hack. But of course, a reminder, Facebook
doesn't sell your data.
As we learned in earlier discovery from Attorney General of DC combined with pressure and hearings from the UK, employees knew about Cambridge Analytica. They called it "sketchy" even before Guardian brought their attention to it.
famously asked about the knowledge and awareness in a hearing in late 2019 causing Zuckerberg appeared to stumble on his answer to keep his story straight.
And it was politically sensitive. A Fall 2020 Channel 4 News documentary even reported and uncovered more details on how the data was used for voter suppression and microtargeting in key battleground states. But that's for a different thread.
This lawsuit even includes the fact Facebook
hired one of the co-founders of the company that mined and sold the Facebook
data to Cambridge Analytica at a sensitive time. His entire tenure and existence is still a deep mystery in all of this but good to see in the lawsuit.
This lawsuit isn't about politics but instead antitrust, governance and SEC-related failures. A reminder to the antitrust matters: one core allegation is Facebook
accelerated its shift to mobile leveraging data reciprocity deals. It's very much in here, too.
We know this from previously unsealed emails and messages which showed the constructs of cutting off data feeds to apps that were seen as competitive threats or weren't willing to provide revenues for Facebook
. Again, ladies and gentlemen, they didn't sell your data.
A hat tip at this point to UK Parliament, specifically MP Damian Collins, who really led the world in uncovering as much of the details here either through accountability pressure and leaked docs as they tried to get Facebook
leadership to answer questions at hearings.
There is a lot in the lawsuit around Facebook
's failure to honor its 2012 Consent Decree. This includes sealed sections that at least appear to suggest the board and leadership never even reviewed required PWC audits or connected any dots to Cambridge Analytica.
Speaking of PWC, this is new to me. It appears they did an investigation in 2019 after everything hit the fan for Facebook
but their engagement was ended before the report was finalized. (note, 220 docs are board materials turned over as part of original suit).
Of course, Zuckerberg's control of the board is not new and is drawn on the separate class of stock (negotiated with assistance by current board member, Marc Andreessen), he controls voting power. He even controls the Nominating Committee to the board among allies.
The lawsuit allegations claim this results in a board where directors are ousted regularly and are mostly in some way conflicted in their relationships to the leadership or the company. These is a lot of pages on this issue.
Lawsuit also claims, "Congress Calls Defendant Zuckerberg To Question And Is Met With Dishonesty" regarding false or misleading answers to Congress. I've documented these concerns in threads previously but good to see claims going before a court.
In testimony, Zuckerberg regularly claimed users maintain control over their data - there are several pages of examples in the lawsuit. However, NYT reported Facebook
was actually whitelisting companies to still receive user data through and after his testimony.
Zuckerberg and Facebook
also made a big deal how they reacted quickly in Dec 11, 2015 when they found out - supposedly from press reports - what Cambridge Analytica was doing including implying they scrambled to get legal certification the data was deleted. Not so much.
Another allegation in the lawsuit of misleading testimony is Zuckerberg suggesting Facebook
doesn't collect data from other apps. It doesn't mince words.
"The Zuckerberg testimony quoted in the immediately preceding paragraph is materially false and misleading."
Lawsuit expands further with research that "61% of apps...automatically transfer data to Facebook
" upon launch. Yes, that's why Facebook
is freaking out about Apple's new privacy rules which kneecap Facebook
's surveillance ads business (which continues to thrive on Android).
The "Insider Trading" allegations relate and document the hundreds of millions to billions made by insiders who would have been aware or neglected their governance duties as documents and risks were filed with SEC making *actual* harms realized read like *hypothetical* risk.
And of course, the lawsuit even catches up to reports in 2021 noting the lack of change in Facebook
attitude as they treated news in April 2021 of 530 million records being exposed as an issue only if the press volume didn't continue to decline. PR also confused press on it.
Final point, the lawsuit asks for this in relief but I would also note there is a lot of sealed board docs. The Attorney General of DC is also deep into discovery and depositions (hearing next Tue 9/28 @ 2:30pm) in much-related case.
Someone needs to wake up the SEC, though.
As to how this suit wasn't noticed, Delaware Chancery charges a fortune per document limiting public awareness. Original case to inspect board docs (Rhode Island) was won, derivative suits were amended/filed/consolidated in shell game. I followed the breadcrumbs. Voila.